Abbey has became the latest bank to cut its fixed rate mortgages as the cost of wholesale funding continued to ease.
The group said it was reducing the cost of its two-year and three-year fixed rate deals by up to 0.15 per cent from Monday.
It is the second time in ten days that the lender has cut its rates, after previously reducing its two and three-year fixed rate deals by up to 0.2 per cent.
Abbey said it had made the reductions following an easing in swap rates, upon which the deals are based. The news came the day after Barclays’ lending arm, The Woolwich, said it was reducing the rate of its lifetime trackers by 0.1 per cent and its fixed-rate products by up to 0.3 per cent.
A number of other lenders have also made reductions during the past week, including Nationwide and Cheltenham & Gloucester.
The recent downward movement in rates is good news for homeowners, despite yesterday’s decision by the Bank of England to keep the official cost of borrowing on hold at 5%.
Abbey is reducing its two-year fixed rate deal for customers who borrow 75 per cent of their home’s value and pay a £999 arrangement fee to 6.34 per cent, while a comparable three-year fixed loan is being reduced to 6.29 per cent.
But to qualify for its best rate, homeowners need a 30 per cent deposit, with Abbey introducing a new three-year fixed rate deal of 5.99 per cent with a £1,695 arrangement fee for those borrowing just 70 per cent of their property’s value.
Meanwhile research from Spicerhaart Financial Services showed that homeowners were continuing to opt for longer-term fixed rate deals to have greater security and benefit from lower rates.
Just 18 per cent of a sample of 1,000 mortgages taken out during June were two-year fixed rate loans, down from 60 per cent a year ago.
The number of mortgages available for people with a five per cent deposit has fallen by 40 per cent during the past month, figures showed.
There are now only 80 different deals available for people borrowing 95 per cent of their home’s value, down from 134 at the beginning of June and more than 1,000 in July last year, according to Moneyfacts.co.uk.
These mortgages are the latest area in which lenders are tightening their lending criteria, following the demise of 125 per cent loans and 100 per cent deals earlier in the year.